Asian Currencies Rise, Led by Peso, as Nuclear Crisis Eases

March 22 (Bloomberg) -- Asian currencies advanced, led by
the Philippine peso and South Korea’s won, as optimism the worst
of Japan’s nuclear crisis is over boosted investor appetite for
emerging-market assets.

The Bloomberg-JPMorgan Asia Dollar Index reached the
highest level since March 10 as the MSCI Asia-Pacific Index of
stocks rallied for a third day. Japanese Prime Minister Naoto
Kan said yesterday that there is “light at the end of the
tunnel” in the battle to avert a meltdown at a crippled nuclear
power plant following the March 11 earthquake and tsunami.

“The fact that there has been no further worsening in the
situation in Japan is helping to boost confidence in global
markets and that has helped to push some of the Asian currencies
higher,” said Christopher Gothard, head of foreign exchange at
Brown Brothers Harriman (Hong Kong) Ltd. “You are seeing more
confidence coming into the market and a little more acceptance
to take on some risk.”

The peso strengthened 0.5 percent to 43.333 per dollar as
of the 4 p.m. close in Manila, according to Tullett Prebon Plc.
The won gained 0.3 percent to 1,120.95 and Indonesia’s rupiah
rose 0.2 percent to 8,718, according to data compiled by
Bloomberg. Malaysia’s ringgit advanced 0.1 percent to 3.0305.

The peso advanced for a third day on speculation the
central bank will raise its benchmark interest rate from a
record low when it meets on March 24.

Bangko Sentral ng Pilipinas will lift its overnight
borrowing rate by a quarter of a percentage point to 4.25
percent, according to 10 of 15 economists surveyed by Bloomberg.
One predicts a half percentage point increase, while four
forecast no change. Consumer prices rose 4.3 percent in February
from a year earlier, the most since May.

‘Rate-Tightening Cycle’

“We expect the central bank to start a cautious rate-tightening cycle later this week,” said Prakriti Sofat, a
Singapore-based economist at Barclays Capital. “A stronger
currency would help against imported price pressures as well.”

China’s yuan climbed to a 17-year high on speculation
policy makers will raise interest rates and allow more currency
appreciation to curb inflation. The current cycle of interest
rate increases is halfway over, the China Securities Journal
said in its editorial today. The pace of yuan gains may
accelerate as it will reduce the cost of imports and help curb
rising prices, the paper said.

The yuan strengthened 0.08 percent to 6.5561, touching
6.5552 earlier, the strongest level since China unified official
and market exchange rates at the end of 1993.

Taming Inflation

The won rallied for a third day on speculation policy
makers will tolerate gains to curb inflation, partly caused by
rising oil prices. Crude has advanced almost 12 percent this
year on political tension in the Middle East and North Africa.
It declined 0.1 percent to $102.19 a barrel in New York today,
earlier rising by as much as 0.3 percent, as Allied airstrikes
on Libya threatened to prolong a supply disruption.

Consumer prices in South Korea climbed 4.5 percent in
February from a year earlier, the most since November 2008,
official data show. The nation’s biggest economic test is taming
inflation as price gains are set to remain elevated in the
coming months, central bank Governor Kim Choong Soo said on
March 16.